Economic systems and thinkers

Adam Smith

Scottish moral philosopher and a pioneer of political economics. Seen today as the father of Capitalism. Wrote On the Wealth of Nations (1776) One of the key figures of the Scottish Enlightenment.

Adam Smith beliefs

-Freedom was vital to any economy's survival, people should prioritise their own interests.

-Freedom to own land or property and the right to keep the profits of a business is essential.

-People will work hard if they believe they will be rewarded.

-Interested in the idea of 'division of labour' and how workers specialising in a particular task could increase the productivity of labour and improve living standards.

-Stated that free trade was in 'everyone's interests', even if it involved importing goods on the cheap from foreign nations.

Adam Smith

Scottish moral philosopher and a pioneer of political economics. Seen today as the father of Capitalism. Wrote On the Wealth of Nations (1776) One of the key figures of the Scottish Enlightenment.

Adam Smith beliefs

-Freedom was vital to any economy's survival, people should prioritise their own interests.

-Freedom to own land or property and the right to keep the profits of a business is essential.

-People will work hard if they believe they will be rewarded.

-Interested in the idea of 'division of labour' and how workers specialising in a particular task could increase the productivity of labour and improve living standards.

-Stated that free trade was in 'everyone's interests', even if it involved importing goods on the cheap from foreign nations.

Friedrich Hayek

Austrian economist who believed that to maintain a healthy economy, government influence was not needed in the market and had heavy influence over Reagan and Thatcher.

Friedrich Hayek beliefs

-Markets guaranteed individual liberty while state interference infringed on liberty.

-Argued that government investment prevented entrepreneurs from being able to 'kick-start' the economy again through innovation and products that consumers would actually want.

-Challenged traditional economic theories revolving around dynamic equilibrium in the markets (gluts and shortages would balance themselves out by market mechanisms) by saying that banks and government investing in markets during times of uncertainty was a bad thing.

-Wrote the 'Road to Serfdom'

The road to serfdom

1944 best-seller written by Friedrich A. Hayek which claimed "economic planning leads to dictatorship" and even the best intentioned governments efforts to direct the economy threatens individual liberty. Also advocated about ideas for individual fallibility.

Karl Marx

19th century philosopher, political economist, sociologist, humanist, political theorist, and revolutionary. Often recognised as the father of communism. Analysis of history led to his belief that communism would replace capitalism as it replaced feudalism. Believed in a classless society where self-freedom and self-development would thrive.

Karl Marx's beliefs

Argued that capitalist practices made people expendable or 'used' people which was wrong. He liked to point to facts that capitalist businesses would try to maximise profit by keeping labour costs down and making jobs insecure. Believed that we should redistribute the wealth of corporations amongst ordinary people. Capitalism forces everyone to put economic interests at the centre of their lives, even ahead of family, friends. He wanted people to be free of ALL financial constraints.

David Ricardo

English economist who believed the theory of comparative advantage (the idea that both countries could benefit from trade). Advocated specialisation, free trade and private property.

Alfred Marshall

Classical economist (market based theory) who is credited with helping come up with the ideas of 'supply and demand' and marginal utility.

John Maynard Keynes

English economist who advocated the use of government monetary and fiscal policy to maintain full employment without inflation, argued this was the solution to financial crises by challenging other classical economists with his belief in the increase of output and decrease of unemployment through government intervention.

Milton Friedman

He was a famous American economist. He strongly promoted the idea of free trade and condemned government regulation and socialism through the advocation of privatisation. Subscriber to Austrian economic theories.

Trickle Down Economics

Economic theory that holds that financial benefits given to banks and large businesses such as large tax cuts will trickle down to smaller businesses and consumers, people have argued that it doesn't increase rates of employment, consumer spending, and government revenues in the long term.

Monetarism

A theory that government should control the money supply to encourage economic growth and restrain inflation, prices should be increased predictably and steadily to maintain healthy prices and spending.

Economic Austerity

Aims to reduce government budget deficits (debt) through spending cuts, tax increases, or a combination of both.

Laissez-faire

Policy that government should interfere as little as possible in the nation's economy.

Capitalism

An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

Socialism

A political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Communism

A political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs.

Comparative advantage

The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors

Nationalisation

The sale of private sector businesses to the government. The sale may be voluntary, forced, coerced or the assets simply expropriated

Privatisation

A transfer of ownership of the public sector (the government) to the private sector (the private owners).